Increase (Decrease) in Net Profit for Current Quarter Compared to the Same Quarter of the Previous Year is Attributed to

Consolidated Net Profit increased by 180.4% to SAR 227.0 million in Q1-FY2020 compared to

SAR 81.0 million in the same quarter of the previous year primarily due to:

• Revenue: Increased by 2.5%, the equivalent of SAR 14.2 million, compared to the same quarter of the previous year driven by:

o Implementation of a yield and space optimization strategy, with new value unlocked from the portfolio offsetting temporary setbacks related to the termination of weak performers. Key optimization initiatives included offering lower discounts, which helped drive higher net rental revenue from tenants and offset lower contract values for the quarter. Meanwhile, the like-for-like period-end occupancy rate across all malls increased from 92.4% in Q1-FY2019 to 93.2% in Q1-FY2020.

• Gross profit: Increased by 10.4%, the equivalent of SAR 36.9 million, compared to Q1-FY2019 mostly due to lower rent expense by SAR 65.1 million following the adoption of IFRS 16 starting from 1 April 2019. This was offset by the increase in depreciation of right-of-use assets in Q1-FY2020 amounting to SAR 38.8 million.

• Impairment Loss on Accounts Receivable: Decreased by 38.5%, the equivalent of SAR 10.2 million, compared to Q1-FY2019 due to:

o A change in the Group’s basis of estimating provisions from previously recognizing provisions against the full balance of accounts under dispute (adopting systematic provision according to tenant categories) to implementing an expected credit loss provisioning model starting 1 April 2018. This is in line with IFRS 9 requirements and led to an impairment loss on accounts receivable of SAR 16.2 million in Q1-FY2020 compared to SAR 26.3 million in Q1-FY2019.

• Finance Cost: Decreased to SAR 73.9 million in Q1-FY2020, down by 65.0% or SAR 136.9 million compared to Q1-FY2019 mainly due to write-off of unamortized transaction costs of SAR 125.2 million in Q1-FY2019, representing the arrangement fees related to refinanced facilities. Unamortized fees were expensed immediately upon refinance in line with IFRS guidelines.

• Interest expense on lease liabilities: Increased to SAR 25.0 in Q1-FY2020 mainly due to the change in the Group’s accounting policy for leases where the Group, as a lessee is required to recognize right-of-use assets and lease liabilities for leases. This is in line with IFRS 16 requirements.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to

Consolidated Net Profit decreased by 11.2% to SAR 227.0 million in Q1-FY2020 compared to

SAR 255.4 million in Q4-FY2019. The movement in net profit was driven by the net impact of the following:

• Revenue increased by 2.9%, the equivalent of SAR 16.1 million, compared to Q4-FY2019, while gross profit grew by 6.0%, the equivalent of SAR 22.1 million during the same period on the back of lower rent expense by SAR 53.1 million following the adoption of IFRS 16 starting from 1 April 2019. This was offset by the increase in depreciation of right-of-use assets in Q1-FY2020 amounting to SAR 38.8 million.

• Operational profits decreased by 2.6%, the equivalent of SAR 8.9 million, compared to Q4-FY2019 mainly due to higher Impairment Loss on Accounts Receivable and an increase in General and Administrative Expenses by SAR 25.9 million and SAR 1.6 million, respectively.

Basis of the External Auditor's Opinion

Unmodified opinion

Reclassification of Comparison Items

Certain comparative figures have been reclassified to conform to the current period’s presentation.

Additional Information

• EBITDA for the quarter was SAR 445.5 million in Q1-FY2020, up by 21.8% compared to Q1-FY2019 and with a 12.3 percentage-point expansion in EBITDA margin to 77.8%. Improved profitability was driven by higher revenue along with efficiency and cost-control initiatives.

• EBITDAR (before rent expense to normalize for the effect of adopting IFRS 16) for the quarter was SAR 445.5 million in Q1-FY2020, up by 3.2% compared to Q1-FY2019 and with a 0.5 percentage-point expansion in EBITDAR margin to 77.8%.

• FFO increased to SAR 300.1 million in Q1-FY2020, up by 101.1% compared to Q1-FY2019 mainly due to the increase in net profit for the quarter. FFO margin is 52.4% in Q1-FY2020, increasing by 25.7 percentage points compared to the 26.7% in Q1-FY2019.

• Cash Generated from Operating Activities reached SAR 83.6 million, reversing the negative SAR 25.1 million recorded in Q1-FY2019 mainly due to the increase in net profit for the quarter as well as a lower change in Due from Related Parties balances (rental receivable).

• Cash used in Investing Activities reached SAR 95.8 million in Q1-FY2020, down 21.7% compared to SAR 122.5 million in Q1-FY2019, primarily due to a decrease in Advances to Contractors related to construction payments for Khaleej Mall, University Boulevard, Nakheel Dammam and Nakheel Extension. This was offset by the increase in additions to investment properties during Q1-FY2020.

Attached Documents

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